Economic growth and the development of telecommunications infrastructure in the G-20 countries: A panel-VAR approach

•This paper uncovers linkages between the development of telecommunications infrastructure, economic growth, and four key indicators of operation of a modern economy.•We study the G-20 countries over the period 1991–2012 and employ a panel vector auto-regressive model for detecting Granger causality.•Our results provide evidence of bi-directional Granger-causality between the development of telecommunications infrastructure and economic growth in the long run.•We also find that, with the exception of the urbanization rate, other macroeconomic variables affect economic growth in the long run.•Thus, omitting macroeconomic variables from studies risks errors of specification.

This paper examines the linkages between the development of telecommunications infrastructure (DTI), economic growth, and four key indicators of operation of a modern economy: gross capital formation, foreign direct investment inflows, urbanization rates, and trade openness. By studying the G-20 countries over the period 1991–2012 and employing a panel vector auto-regressive model for detecting Granger causality, we find a network of long-run causal connections between these variables, including bidirectional causality between DTI and economic growth.

Graphical abstractNote 1: We use a composite index of telecommunications infrastructure for DTI and percentage change in per capita gross domestic product for economic growth. Our macro variables are GCF, FDI, URB, and OPE.Note 2: DTI: Development of telecommunications infrastructure; GCF: Gross capital formation; FDI: Foreign direct investment inflows; URB: Urbanization; OPE: Trade openness.Figure optionsDownload full-size imageDownload as PowerPoint slide